Craigslist talked back to eBay's claims of stake dilution, saying the online auctioneer's actions were unethical.

The online auction giant, eBay sued craigslist on Tuesday on allegations of unfairly trying to dilute eBay's stake in it.

In 2004, eBay bought a 28 percent stake in privately held Craigslist.

eBay alleged then in January of this year, Craigslist's board - consisting of founder Craig Newmark and Chief Executive Jim Buckmaster - unilaterally acted to dilute eBay's economic interest in Craigslist by more than 10 percent.

Coming from a company that views Craigslist as a prime competitor, filing a suit without so much as mentioning these assertions to us beforehand seems unethical and suggests ulterior motive, said Craigslist in a statement posted on its blog on Tuesday.

eBay got into Craigslist in 2004 after one of the former Craigslist shareholder closed a deal with eBay to take his stake in the firm.

Craigslist's founder, Newmark said the time when eBay joined Craigslist, both companies had the same philosophies but eBay in a statement said at the time of the deal, it was more interested in learning about classifieds business.

The San Jose-based online auctioneer had $7.7 billion revenue in 2007 and currently has 279 million registered users, ranking 17th as the most popular English-language site compared to Craigslist in 45th position.

Based in San Francisco's Inner Sunset neighborhood, Craigslist has 25 employees and its page views have grown from 1 billion per month in 2004 to 9 billion per month now.

Craigslist said it has 30 million new classifieds per month posted for free.